BNSF Fuel Surcharge Program

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BNSF Fuel Surcharge Program
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Overview

• Fuel surcharge allows transportation companies
  to recover a portion of increased expense
  when the price of diesel fuel increases
  significantly
• The fuel surcharge percentage changes as diesel
  fuel prices change
• Many transportation providers charge fuel
  surcharge, including most trucking
  companies, all Class I railroads, UPS and
  Fed Ex
• All railroads are currently charging fuel
  surcharge as a percent of revenue

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BNSFs Fuel Surcharge Program

• The objective of BNSFs fuel surcharge program
  is to cover incremental fuel expense above
  1.25 per gallon
• Based on customer feedback, in March 2005, BNSF
  announced a new mileage-based
  surcharge
• The new program will be implemented January 1,
  2006
• This gives time for BNSF and customers to
  design and implement system changes

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Why Change?

• Customers asked for it
• Mileage based surcharge is more fair and
  equitable
• Fuel expense is primarily mileage driven
• Freight moving in the same lanes and in like
  types of service will be assessed the same fuel
  surcharge
• More closely ties actual fuel expense to the fuel
  surcharge

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Local/Rule 11 versus Interline

• Mileage-based fuel surcharge applies on
• BNSF local movements
• The BNSF portion of Rule 11 shipments
• Shipments involving BNSF and a handling or
  junction settlement shortline
• Revenue-based fuel surcharge applies on
• Joint-rate interline shipments
• At this time, interline billing systems and
  practices cannot handle mileage-based surcharge

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New Mileage-Based Tables

• Five tables will be used, reflecting differing
  types of service
• Coal Unit Trains
• Automobiles
• All Other Carload
• Trailers
• Containers

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New Mileage Based Tables

• Tables are based on the On-Highway Retail Diesel
  Fuel (HDF) prices published by the Energy
  Information Administration of the U.S. Department
  of Energy
• Carload surcharges will be based on the average
  HDF price for the second prior month
• Coal will use BNSF rail mileage all other
  traffic will use highway mileage as shown in Rand
  McNallys Household Good Carriers (HHG) Mileage
  Guide

Each 0.04 per gallon increase thereafter, apply
an additional 0.01 per mile
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Why Highway Miles?

• Many customers prefer highway miles
• Highway miles are available from an unbiased,
  third party provider (Rand McNally)
• Rand McNally is an industry-recognized provider
  of highway miles
• In most cases, highway miles are similar to rail
  miles

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How To Get Highway Mileages

• Highway mileages will be available at the
  BNSF.com website on September 30 up to 10 active
  mileages may be queried at once
• Milemaker Windows-based software may be
  purchased from Rand McNally indicate that you
  are a BNSF customer
• Contact Rand McNally for non-Windows based
  software purchases

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Calculating the Surcharge

• Lets do a few examples
• Single carload wood products from
• Pasco, WA to Ft.Worth, TX
• Minneapolis, MN to St.Louis, MO
• Spokane, WA to Birmingham, AL

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Step 1 Get Highway Diesel Prices

• Go to the Energy Administrations website
  www.eia.doe.gov
• Calculate the average HDF price for the second
  prior month
• The monthly average is also published at
  bnsf.com/tools/prices

Average 2.29
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Step 2 Use the Mileage Table

• For Carload traffic, use the All Other Carload
  Table
• Use the HDF price to find the surcharge per mile
  in the table
• The monthly surcharge per mile will also be
  published at bnsf.com/tools/prices

2.29 HDF 27 cents/mile
Each 0.04 per gallon increase thereafter, apply
an additional 0.01 per mile
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Step 3 Get Highway Miles

• Look up the mileages on BNSF.com (beginning
  9/30/05)
• - or -
• Look up the mileages on Milemaker

• Mileages
• Pasco, WA to Ft.Worth, TX 1812 miles
• Minneapolis, MN to St.Louis, MO 547 mile
• Spokane, WA to Birmingham, AL 2223 miles

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Step 4 Calculate
1) Pasco, WA to Ft.Worth, TX 1812 miles x .27
per mile 489 per car 2) Minneapolis, MN to
St.Louis, MO 547 miles x .27 per mile 148
per car 3) Spokane, WA to Birmingham, AL
2223 miles x .27 per mile 600 per car
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Comparing Old vs. New Surcharge

• The impact of the program will vary by customer
  and by origin/destination combination
• In our examples

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Billing

• Billing will look the same as today, but the fuel
  surcharge will be calculated differently
• Freight bills will show miles (or percentage of
  revenue for interline shipments) used to
  calculate the surcharge
• Customers that use software to pay or audit bills
  will need to make programming changes

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Looking ahead

• Testing with a variety of customers will occur
  before the end of the year
• Changes to the program and tables may be made
  over time as BNSF and customers gain experience
• Any changes will be communicated via customer
  advisories
• We want your input, ideas and suggestions for
  improvements